tv Worldwide Exchange CNBC November 22, 2012 4:00am-6:00am EST
this is "worldwide exchange." these are the headlines from around the world. flash pmi shows china's factory activity expanding above 50 for the first time in a year. stocks in shanghai fall. no sign of compromise as eu leaders arrive in brussel. it could turn into four days of budget talks. david cameron reiterating his criticisms of increasing block spending budget in 2013. and palestinians pour on to the streets to celebrate as cease fire ends eight days of deadly strikes between israel and hamas.
we kick off three hours with the euro son flash services pmi, 5.7. a little weaker than consensus. lowest since july 2009. business expectations 48.6. manufacturing manufacturing pmi 46.2. composite pmi as a result 45.8, which is pretty him bang in line with the reuters poll. so service sectors worst since
july 2009, decline in manufacturing eased a little bit more than expected in november. joining us, chief european economist. ricar ricardo, thanks for joining us. so still a negative territory. what does this point to in terms of the economic decline for the fourth quarter? >> i think it's in line with the idea that real sgchlt dp will decline by at least 0.2%, possibly 0.3%. it will give us a negative entry point in 2013 when i expect an average growth of minus 0.2%. so still moderately recession territory. >> the german flash composite
pmi 47.9, services 48, manufacturing 46.8, is germany -- we just saw the 0.2% print. is girl aermany going to have a negative contract? >> i'm looking for a contraction of minus 0.2. so only aed modest one. i expect activity will stabilize in q1 of next year, but obviously that requires a favorable external environment, meaning u.s. not going into this deep due to the fiscal cliff. and also signs of improvement in asia. >> meanwhile the french pmi says the survey there suggests a 0.7% gdp drop in quarter 4 for france. >> that seems quite large. we've seen in recent quarters numbers out of front which were higher than suggested by the
pmis, however, they then revised down q2. so i'm looking for a contraction of 0.3 in france quarter on quarter in q4. >> what's going to change things, ricardo, what will turn things around? >> i think on the policy front, not much one can effect. fiscal policy will remain tight next year. the ecb doesn't have a huge margin to ease policy. i'm expecting that they will cut the refinancing rate. but i don't think it will go to negative rates for now. so they can only do perhaps 25 basis points on the main refinancing rate. the omt bond buying facility can only be activated if one of the
countries apply. and it doesn't look like neither spain nor italy will apply anytime soon. and anyway the bond yields have declined quite a bit compared to july. so what we can hope for is really some external stimulus meaning the rest of the world improves over the course of the next couple quarters. and that provides a bit of a lift to activity in europe. >> spine has three issues today in a bond auction and are funding for 2030. are they going to -- how long will they be able to find themselves for? because it's only if the get problems in auctions that we might enact the omt. >> yes. i mean, i think if bont yields remain around current le
the spanish government will probably wait. going into the new year, they will have to step up bond issuance. i think the market is expecting this, so this will not necessarily force spain to take the bailout, but of course many things can go wrong including the economy could be even worse than what we just discussed. in that case i think spain would ultimately have to apply. but i don't think they'll do that over the coming weeks. >> all right, ricardo, good to talk to you. thanks for that. don't forget, of course, if you have any thoughts, questions, comments, e-mail us at cnbc.com. it's thanksgiving to u.s. markets, so they're closed, so that means we have a special three hour show for european and asian viewers today. still to come, india's
parliament has opened its winter's session for what could be a tough first day back to business for the prime minister. we'll find out what opposition he faces from our correspondent in mumbai. we'll also find out why asian casinos are putting their chips on the table despite slow economic growth in the region. and obama saves cobbler, but many of his turkey friends will end up on the table today. we evaluate the cost of a thanksgiving dinner with a soft commodities expert. all of that and lent more coming up over the course of the next three hours. it's not just eurozone pmis. china's manufacturing activity expanded for the first time in more than a year this month. >> upbeat data today. according to the flash pmi, the country's manufacturing sector expanded in november coming in at 50.4. and that eat first time it went above the boom or bust level of 50 in 13 months.
almost all the sub indices showed improvement. the output sub index also hit a 13 month high at 51.3. and the latest reading follows a series of data showing stronger exports and improved industrial activity which some say are clear signals rebound is picking up steam. and a turning point for the country and that china may see a v shaped recovery with things improving from here on. we'll have more clues to see if that's true when the final reading and official data are received next weekend. but for now the market is questioning what these figures will mean for the policy given there's lack of policy cues or direction. ross, back to you. >> thanks for that. catch you again in a moment. meanwhile, the imf says the region's economy has bottomed and we'll see a pick up in momentum next year.
andrew, what do you make of the pmis, what do they tell you if anything? >> well, the figures certainly look steadier than before across a broad front but it doesn't mean china will revert to the previous decades of explosive growth. in fact china strategy is lower and more balance and more sustainable growth. so i think we're he seeing the beginning of a more steady minor recovery. a more even pace. let's not forget the outgoing president hu recently announced china will increase its gdp per capita by the year 2020. that would mean a growth rate of something like 7%. considering this year, china is
likely to hit the target of 7.5% for china growth for a milder 7% per annum up to the year 2020 is doable. >> so this sort of knee jerk reaction, if the number is better we get less stimulus is that too sim plus tick or not? >> there was a time when china's economy was so wobbly and all numbers looked terribly bad that there was a speculation that china would open the spigot, as it were, and repeat some sort of a stimulus package. but with all the positive numbers going forth, china's unlikely to repeat this exercise. but don't forget china's massive stimulus caused a lot of problems for china because of asset public he wills and the
threat of inflation and so on. so i think this time around, china is unlikely to repeat the exercise, but on the other hand, in line with the direction of the party congress and the five year plaid, china will maybe wood up and try to upgrade china's economy. but i think the emphasis also on social development, a lot of them share economic growth, so they'll all translate in to a milder steadier growth rather than double digit growth as we saw during the past couple decades. >> andrew, we'll come back to you a little bit later. let's kick off the global markets report. look at the reaction elsewhere in asia to the pmi. >> yeah, sure, thank you, ross.
asian markets mostly finished in the green with the exception of the china markets. shanghai composite shrugged off the promises pmi data to close lower by 0.7%. liquor makers had another nasty session hurt by contamination fears. excessive levels of plasticizer were found. but supported policies helped buck the trend. shares in hong kong closed at a two week high. automakers and electronic stocks were among the most heavily traded stocks with gains of 2% to 4%. the kospi was lifted by a strong rally in technology shares.
upbeat china manufacturing data helped spur a broad based value. i said i can't sensex still on the move, now trading higher by 0.4%. ross, back to you. >> meanwhile here we are in europe trying to make it four days of gains. volume is light because no us u.s. involvement. the ftse flat, 0.4 higher. about a percent higher for the ibex. the yen has 6 1/2 month lows against the euro. dollar jen 7 1/2 month highs. 82.70 where we stand. euro-dollar a little bit firmer. is at the present time 2857 is where we stand. aussie dollar pretty flat. so that's where we stand right now on those markets. don't forget we have a spanish bond auction coming out, as well. spain going to raise up to 3.5
billion across three issues of 2015, 2017, 2022, as well. meanwhile, we're set for a budget slowdown in brussels. let's get over to silvia who is still there. i understand her man van rom boy will have 27 individual bilateral meeting. what will he chief through that will have 27 individual bilateral meeting. what will he chief through that? >> you need something to keep you awake, doesn't it. obviously he wants to get to a compromise. we know we have the commission proposals on the table which come up with a small increase in the eu budget. then he brought up a compromise proposal which at least comes up with some savings of 18 billion in will. 1345u8 change between you, me and the goal post. but that is not enough for some,
not enough possibly for germany, wanted a bit more savings as a headline speaker. certainly not enough for david cameron. he already walked into the ip entrance here and said -- >> right. unfortunately, we can't tell you what he said because we've lost the line. we will try to re-establish connection in brussels. meanwhile disputes over how much money the eu spend, one member has raised a sobering question. how many bottles of alcohol are actually stocked in the secella of the european council? tell us what you think it might be. email@example.com. kr @cnbcwex. argentina will have to hold out creditors owning the country's bonds which have been in default since 2001.
the new york federal dutch has ordered the country to make the first payments on december the 15th. argentina had appealed a previous ruling ordering payments to hold out bond holders. also we'll be heading out to tel aviv as the first day of the cease fire between hamas and israel goes in to effect. find out why our next guest thinks it might not hold. [ female announcer ] the power to become a better investor has gone mobile. with features like scanning a barcode to get detailed stock quotes to voice recognition. e-trade leads the way in wherever, whenever investing. download the ultimate in mobile investing apps, free, at e-trade. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd
india's parliament begins today. we're in new delhi. what is the center of discussion going to be? >> well, upper and lower houses have now been adjourned until tomorrow. former ally proposed a no confidence motion. of course that proposal was rejected. all the opposition parties have been demanding a roll back of
policy that was approved in september. now what we have heard is that on monday, there will be apall party meet to go see if there can be a common ground on policy and if the opposition parties will let the parliament function, but going by the experience of today, unless the government accept the opposition demand for a discussion and voting on retail policy, it will very hard to say if the parliament session during this winter will function. so we have to wait and see what happens on monday and only then we can tell our viewers if the winter session of the parliam t parliament, if any business will return to the session. with that, it's back to you. >> thanks so much for joining us. we'll see what evolves there. international leaders are calling for the cease fire between israel and hamas to be upheld. the two sides agreed yesterday to abide by an egypt brokered
peace deal after eight days of fighting that left 130 palestinians and five israelis dead. overnight, thousands poured on to the streets to celebrate. joining us from tel aviv is m martin fletcher. martin, what is it like there did today following the cease fire and what hopes are there? >> well, those scenes you just saw in gaza, the celebration, you did at any time see that here in israel. there's a sense here there is nothing much to celebrate. the cease fire took effect 9:00 last night, israel time. so at least so far so good. it's all quiet. but the israelis have not yet sent for instance their children back to school, they said let's wait and see whether the cease fire real holds, whether there really will be no more rockets from gaza. at the same time, the israeli army which called up about 30,000 reserves, they're still on duty at the border. but they'll probably withdraw
those reserves soon. the issue really although they reached a cease-fire, israel won't be launching a ground invasion of gaza. palestinians will stop firing rockets at israel. the question is how do you enforce the cease fire and how long will it last. there is great skepticism among the israelis and that's one reason why they're not celebrating. by past experience, it isn't look like it will last very long, so that's the key question. israel wants an end to the rearming of hamas. they don't want more weapons to be brought into gaza and there is no guarantee of that. and has made for it part wants many things, it wants israel to stop killing its leaders and stop rocketing gaza. but they also want the lifting of the border controls, they want free access in and out. in other words, an end to the block and i had, the isolation of gaza. and those details still need to be worked out.
so what's been agreed here is not a real agreement on paper, but simply both sides have stopped fighting quiet for quiet. the details still need to be worked out and a lot of problems still likely in the future before this really takes hold, ross. >> martin, for you now, thank you. we'll come back to you a little bit later during the program. nbc's martin fletcher. let's get more on the issues. joining us is israel and palestinian bureau chief at reuters. thanks for joining us. martin says we have a cease-fire, but it's all the details that we really have no discussion on. >> i think the egyptian president morsi, it's in his interests to make sure hamas complies by the broad agreement that's been released. and i think the israelis will certainly be eager for a prolonged period of time.
at least get them to january 22 and well beyond that. i think there is skepticism also and in gaza, but the arab world has changed and there is a chance that there could be a prolonged period of peace or relative quiet down on the gaza front. >> how significant is it the cease fire has been negotiated with sort of the new authorities bunkering in egypt. p. >> it's incredibly important. mubarak with the last truce in 2009, but no relationship with hamas. morsi has a strong relationship with hamas. has mass hamas is a part of the muslim brotherhood world and the fact he's out there backing the truce gives it much more weight than the previous documents.
i think the test for hamas will be whether it can rein in the smaller factions that have sprouted up in gaza that are more radical than itself. and it will be eager to prevent missiles from being fired by these smaller groups that could wreck the truce. >> 2009, we had a 22 day conflict. what is going to need to change to make this one last? we heard from martin, the israelis don't want the mock r coming in. what actually is going to happen? >> you might see the occasional rocket fired from much smaller groups that perhaps weren't involved in the negotiations.
but i think that everybody will try and make this work for now. it is in everybody's interests to make this work israeli army will stay on the border. and then we'll have to see. i us secretary pa we will see some easing though not immediately. they cannot be seen to be giving hamas what their public might seem to think right now, but i think that will come further down the line and there will be easing of restrictions an an attempt to i don't want to use the world normalization, but an attempt to smooth out some of the relations that exist between the two. >> okay. thanks very much for joining us.
nato ambassadors met yesterday to consider a request to deploy patriot missiles near tur ddyky turkey border with syria. >> the it turn kish government stressed the tee employment will be defensive only. and that it will in no way support a no-fly zone or any offensive operation. >> the situation is detearer be rapidly as rebels continue to battle government forces. so still to come on the show, as tensions simmer between china and japan, our panel exams if asia's top economies can still do business despite national list tick further at home.
leaders begin arriving in brussels for what could turn into four days of budget talks. david cameron iterating his criticism of increasing the bloc's spending. palestinians pour into the streets as eight days of strikes end between israel and hamas. this is a thanksgiving day holiday. so happy thanksgiving if you celebrate it. slim gains yesterday. ibex up 0.8%. we are focusing on spain in the next 15 minutes. we have spain tapping the markets. they'll start pre-funding 2013. looking to raise up to 3.5 billion across three issues. the 2015, three years, five year and a nine year. that's where the yields are
currently trading at the moment. spanish ten year, you can see continues to decline. 5.66%. we had been nudging 6% in the recent ten days or so. so yields have come down today. so we'll see whether opportunistic and try to raise more than the 3.5 billion if those yields suggest they can. japan's auto industry has been hit hard by flare up of tensions in tokyo and beijing. car about ports to china dropped more than 80% in october because of anti-japanese sentiments. but that's not stopping car giants from doing business in china. toyota is planning to launch 20 new models in the mainland over the next three years. at the same time, nissan will make its first electric car under its china only brand by 2015. and despite the rocky relations between japan and china, the two countries are determined to strengthen trade ties.
in cambodia earlier this week, the two countries plus south korea said they would formally launch negotiations on a three way pact with talks due to start early next year. joining us now, steven nagy, assistant profgts essor of japa studies. and andrew is still with us. steven, how significant is it that this week in cambodia with korea they're looking to extend trade relations. what does that signal in turn with the new leadership change? does that mean relations over the island going to get slightly better than they have been, do you think? >> i think relations between japan and china in terms of the direction that they're going to go right now are based on the relations of the past and especially the post world war ii period. specifically strenenning economic relations, continued
integration of the two economies, strengthening trade, people relations. this is independent from the island dispute. both states and both leaderships in both states would like this territorial dispute to disappear so they can continue japanese invest nmt to china, continue the trade relationships and to hopefully maintain stable economic relations between the two states. >> if they wanted to disappear, it would be quite easy. just stop making it an issue. >> ooyou're right. it's an issue the japanese would like to disappear and on the chinese side, because of the way and the direction that nationalism has moved in the past few years, may be difficult to disappear.
on the japanese side, losing these territories to china may potentially affect its other disputes with russia and south korea. securing important resources in the south china sea as well as potentially destabilizing or creating a situation in which china doesn't actually have full control of the south china sea for its exports and imports of oil and other natural resources into china. so the issue for the two countries is that being driven by very different factors. >> i know japanese businesses have sort of started to think about the cost benefit of doing business in china because the chinese government has demonstrated their ability to impact business. so i was talking to -- let's he's bring in andrew on this. i suppose the question is
whether the chinese are feeling any pinch on their side. >> trade is not everything. don't forget it's not just a financial issue only between china and japan. don't forget the american pivot to asia has complicated things. and also of raising nationalism both in japan and china. a look at japanese politics recently, the current administration has weakened very much by the economy, but also by the rise of another political
party and the political party is driven by japanese nationalism. and they would like japan to adopt a more aggressive role in the region if necessary boosting up it defense as it were. this is going to complicate problems. >> is that part of of the problem, steven, weakening economy, weakening economic problems? sort of essentially going back to that old 19th century politics. if we have problems at home, we find a bit of national list tick fofsher and issue to stir that up to gain support. >> i think very much the issue is over the recent territorial issues between japan and china, unfortunate unfortunately exas per ratper re former governor to take control of the island and eventually
forcing the hand of the noda administration to nationalize the islands or bring them under control of the japanese state has caused and spread so many problems and misinterpretations between the states of intentions of both states. on the noda side, their pup of bringing these islandses under control was to prevent any further incursion of both japanese and chinese nationals on to the islands to prevent tensions from rising between the two states. i think this has been misinterpreted on the chinese side. it helped exasperate nationalism on both sides. will this change with theed a vent of the new party in japan? i don't think it will change. the sunrise party will not come into power. he will not be a political force
in terms of the next administration. those two leaders are interested in strong sigh know japanese operations and building a peaceful path forward.know japa operations and building a peaceful path forward.rs are ind in strong sigh know japanese operations and building a peaceful path forward. hopefully they can do it on better cultural and economic and political terms. >> andrew, you wanted to jump in. >> i was referring to american pivot to asia and as part of the whole regional rebalancing for america. and on the one hand america doesn't take sides on territorial disputes, but on the other hand is disputing stronger military alliances with china's
neighbors. and that has emboldened those chinese neighbors with rival claims and of course china cannot be seen to back down especially after the new leadership transition. so this is going to make things very complicated. i think that in the near term, what one hopes to achieve is really uncontrollable and unpre-tiunpre unpredictable consequences arising from a confrontation or standoff in south china sea. so it would be to advantage of both parties or in fact to the region if some sort of code of conduct could be agreed just to prevent the military crashes from escalating into the full blown war, setting the tear d r territorial disputes to one side. if the code of conduct could be agreed and that would enable all countries to concentrate on
growth rather than military or territorial confrontations. >> okay. andrew, teasteven, thank you ve much for joining us. have a good evening. and there's another indication china is not letting territory spats get in the way of business. the nikkei has more from tokyo. >> the nikkei has reported that an investment fund likely affiliated with the chinese government remain as prominent shareholder of japanese companies. the fund called od 05 omnibus is among the top ten shareholders of at least 145 japanese companies listed on on the first section of the tokyo stock which x. change exchange as of the end of october. the fund's total investment stands at $28 billion that's down 10% from six monthsing a go, but the fall is large "on the back of declines in stock
prices. over the past six months, it has raised stakes in 88 companies and also panasonic's fifth largest shareholder up two ranks from its position earlier this year. that's all from me. back to you. >> thanks for that. samsung electronic shares have hit a record high thanks to a u.s. court order which may help the tech giant in its battle with apple. those details from seoul. >> analysts say there's a possibility of a break through in samsung's patent battle with apple. so a u.s. court has ordered apple to disclose its recent agreement terms with htc for samsung including their licensing fremt. the focal point here is whether there is an overlap between the patents and apple htc agreement and those in the samsung apple case. if there is, it's expected to
help samsung's efforts to dodge a permanent sales ban on its smart products in the u.s. market. although this closure is attorneys eyes only designation, maybe we can get some hints from future legal involvements between the two giants down the road. also separately, shares life time high on expectations that its mobile business will continue to lead strong profit growth ahead and now samsung's due to report fourth quarter earnings guidance first week of january. back to you. >> okay. thanks for that. barclays will stop floor trading at the metal exchange. they will remain an lme member. according to sources reported on on the wires. meanwhile olam is taking short selling waters to court. the singapore commodities trader is taking legal action against the research firms for comments which caused its shares to drop
sharply earlier in the week. olam says the firm is seeking i unspecified damages. and banks may be cuing up to downgra downgrade. in a statement fitch says the write-down was expected and already priced into hp's rating. fitch also says meg whitman gives management stability which will help to achieve its long term goals. and the british parliamentary commission hearing on banking standards is under way and this time it's the bank of england's governor marvin king in the hot seat. yesterday george osbourne warned the committee separating retail from investment banking would hurt the society as a whole. osbourne instead asked the panel to allow government time to introduce its own reforms.
>> we've got to this point. we've had two years of a commission that was set up, a bunch of people on the commission who were highly regarded, consulted widely. debates in parliament about it, we've come to this point, we have draft legislation before us. >> and mervyn king speaking at the moment. he says the proposal needs clarity and should not be decided by the regulator. and he says parliament should see the details of the secondary re ren regulation on the ring fence. right. we now have a spanish bond auction results starting to come through, as well. they have sold in total 1.7, 1.5, if i can add all that up fairly quickly -- they lk like
they've raised a little bit more than the 3.5 they were looking to raise. bid to cover is on the three s year is 2.1. results are canning through rather slowly. bid to cover on the 2021 is 1.8. hang on, i have more details here. the maximum yield on the three years, 3.663%. that is lower than the 3.67 on on november the 8th. maximum yield on the five year, 4.519. again lower. maximum on the nine year, yields have indeed come down. and the total sold because my math is a little bit shaky this
morning is i think a little bit more than the -- i have some problems adding up. yeah. okay. we're there. 3.8. we have raised more than the 3.5 billion that they were maxing. yields lower across the board. and they've raised a little bit more. 2013 is under way. we'll take a closer look at that in a few moments time.
european council? let us know what you think the answer might be. i can give and you clue it's in the thousands. firstname.lastname@example.org or tweet at cnbc m @cnbcwex or @rosswestgate. we will give you the answer. so worth tuning in. i think it's a combination of both the you atwo. airlines under pressure to make changes to the way they do business increased international air traffic flows are impacting carriers across the globe. but middle eastern carriers seem to be ahead of the game, passenger traffic up 17.5% during the first eight months of this year.
yousef, what's the next stage for the growth? >> you would think it would start to moderate, but it doesn't look like that's the case. when's interesting is they've been splashing the cash. they are on an acquisition spree. they bought stakes in three and what's notable is the fact that they have not necessarily bought majority stakes. these are all minority stakes. a lot of analysts are questioning the strategy especially in the case of air berlin where the balance sheets have been a mess. but here's what the president of the airline had to say on that. >> equity is one step further. the key issue in equity had we continued to improve our top line, generate revenue, how can we access key markets where we may be bilaterally con trained or we don't have the ability to
service secondary cities.trainer we don't have the ability to service secondary cities.strain or we don't have the ability to service secondary cities. how can where can we achieve gr scale. and the board of directors are being very strong with us that we must meet key criteria. i don't intend to manage other airlines. >> access then is the key word here and it's also a way of circumventing some of the difficulties they've been facing and acquiring additional landing rates. but there's something broader at stake here and that is the fact that the whole industry. >> that traditional flows are changing. the goal of hubs as a transfer point, a range of activities, the consumer is saying the hubs are working better than the
traditional asian or european hubs. at the end of the day, the consumer will determine who is successful, so we have to get the right product, the right aircraft, the right positioning. and quite frankly that's what i believe they have been doing. >> in terms of scale, still quite a long shot from emirates airlines. of course you can watch the whole interview later on. we'll talk as well about the did deal with manchester city and what that is all about. and where he loves sports and much, much more. i'm sure you'll make it, ross. >> yeah, you know it. okay. good stuff. we look forward to that. don't miss out. yousef works very hard on this program. can i tell you. and it's good stuff, as well. yousef, thanks very much. let's recap the spanish auctions. we are in you pre-funding for 2013 as far as spanish debt is
concerned. 207 billion euros is the target for 2013. a good start this morning. they've raised just under 3.9 billion euros. yields were lower than they were for previous issues. so anyway, they're up and running. they also raised money earlier this week. they have got private placement bond which they've announced. it will happen next week. they put a notice out this morning for a five year private placement of 3.28 billion. we're not quite sure you are what that is for.
should be a private placement sometime next week. in fact next thursday it will be placed, as well. carries a 4.75% coupon. financial times has released its annual ranking. topping the list for the second time in three years, this gentleman, germany's wolfgang schaeuble despite some contentious comments, the committee highlighted his well articulated vision for an integrated europe and commitment to the eurozone and second place was last year's winner. but i thought we just said schaeuble was the winner second year running. anyway, spain was the first loser. santander is reportedly considering an ipo of its american car financing business. santander planning to float the unit in the first half of next year
year. and cobbler and gobbler are two fairly happy turkeys this thanksgiving. opting out of the traditional feast for a tour of the white house instead, part of the holiday tradition is a presidential pardon for one of the birds, though both will walk away this year for the first time animal lovers voted for their preferred bird on facebook. cobbler is the nation's choice. if national turkey coming across as a bit of a ham. we'll take a short break. still to come, we'll be joined by a guest who says the u.s. stocks are nearing a top of a bubble. than the ups store. that's right. i've learned the only way to get a holiday deal is to camp out. you know we've been open all night. is this a trick to get my spot? [ male announcer ] break from the holiday stress. save on grounipping at fedex office.
china factory activity expanding above 50 for the first time in a year. stocks in shanghai down on worries it means beijing may rein in stimulus. a rebound in the euro season economy that is still fairly elies sif. latest pmi figures showing the region continuing to shrink in november. and no sign of compromise as eu leaders are arriving this brussels. palestinians pour on to the streets to celebrate at a brokered cease fire ends eight days of deadly strikes between
israel and hamas. should you have woken up early state side and you've tuned in, happy thanksgiving to you. of course it means there are no u.s. markets open today. they are closed. so we're trading without the united states. ire pea an stocks are trying to make it four days of gains. we were only up marginally for the ftse yesterday. just three points. ftse 100 up nearly half a percent. cac 40 up a third. spain up 0.8%. yields are lower across the board. ten year yields are also lower.
5.66% as are italian yields back down to 4.8%. fairly comfortable. let's show you you the reaction on the three issues. a three years, five year and nine year. and you can see yields are lower, as well, on these three issues. so fairly good start. but spain needs a good start because it has to raise more money next year. around about 207 billion compared to the 186 it had to raise this year. next year will be a bigger test. euro-yen up. dollar-yen 82.64. we've also been reacting to the china pmi data in asia. let's get more on that in singapore.
>> most asian markets finished in the green with exception of the china markets. the shanghai composite weaker despite the november flash pmi data showed the country's manufacturing sector expanded for the first time in 13 months. chinese liquor makers had another nasty session by lingering contamination fears. there was supported policies. the rest of asia rallied. shares this hang congress hit a two week high. the nikkei managed a strong finish to end at a more than six month high. auto majors and electronic stocks were among the most heavily traded stocks. the kospi was lifted by a strong rally in technology shares. samsung electronics gained over 2% as the u.s. kicks off its
holiday shopping season. in australia, upbeat china manufacturing data helped spur a broad based rally. the asx 200 ended at a ten day closing high. india sensexs also ended in the green higher would i a quarter of a%. ross, back to you. kooaccording to our next gu, the only time equities have gone higher is during a bubble. richard, what metrics are you saying they're overvalued? >> we use a metric that gives and you genuine idea of the returns you're likely to get. so what we generally use is a cyclically adjusted pe.
now, what we've done is to slightly alter that you can make it a little more short term by comparing that with the trailing pe and looking at the gap between them. if you look at the current valuations, over the last 130 years, u.s. stocks have gone down from current valuations 50% of the time over the next two years. which means they've gone up 50% of the time, so of course you can take an especially bet on that one. the trouble is those 50% of the times were bubbles. so the real question here, there's a lot of questions, one of the big questions is you know that corporate profit margins are high, you know that corporate profit is a% of gdp is high, so what this metric assumes is that the mean reverts over a long period of time. now, what we know globally is that profits are shrinking.
they haven't shrunk in the u.s. until now. people talk about the fiscal cliff and problems in the economy. that's a big question, but profits are already shrinking and that looks like a bad risk-reward trade. >> from a trade perspective, which is entirely different, there is an argument on to be made that actually if we get some kind of agreement on fiscal cliff, naturally there would be some kind of bounce. >> i would assume so. but how long it lasts is a different question. even then you'll be tightening fiscal policy.
so the best you can hope for is very low growth anyway. and they'll be looking at s&p companies. activity is a lot weaker than it was and that will put pressure on the top line. which is pretty much what you've been seeing from a lot of companies that have been announcing 46- >> so you'll also be underweight emerging stocks, as well. >> we've been underweight emerging stocks since january of last year. and that is mostly ---le valuation question in part, but mostly it's a question of china and slowing chinese growth. so if you look at the performance of industrial commodities and emerging stocks, they fit like that. they are very, very close. >> we had a bit of trade data suggesting china is stabilizing. how much more of that do you
need to see for you to change your view? >> statistics in china are more than a little questionable. what you're seeing, maybe there's a little bit of stabilization, maybe a seasonal effect going on there, but if you look at exportses in to china from the likes of australia, from the likes of brazil, actually they're doing pretty bad. you are seeing a little bit of stabilization pick up from the likes of taiwan and korea, which does suggest that more sort of consumer electronic type of pick up there. but there our point of view, china has had a credit bubble. it looks like a property bubble. these things just don't end well. they just don't. and the broader point about china and actually asian companies in general, but particularly north asia, is that
their current margins have been shrinking for years and years. so they knew that top line growth in nominal gdp in order to get profits. but that's been shrinking very fast. down 17% year on year. >> which is a good reason why the chinese market and others have been a sticking underperformer. we'll pause there because that's what you don't like. you quite like fixed income and in europe. so we'll get into that. more to come from you. financial times has named wolfgang stables as it top finance minister of a year, but he's made a bit of a name for himself for what we like to call even schaeublisms. we'll head out to brussels for an expert view after the break. [ female announcer ] e-trade technology
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plus a cease-fire ends eight days of deadly strikes between israel and hamas. schaeuble has been reportedly sending mixed signals. according to dow jones sources, he officially said determine any would be open to forgiving greek debt only to backtrack on those comments a day or so later. he has been voted as the european finance machiinister oe year. silvia, what do you make of these reports? >> i think it was a little bit of a maybe wrong interpretation of the colleagues involved. i'm not sure. because i saw this already yesterday when we were talking about what came out of the budget debate in germany. and i think it was relatively clear. two more years for greece seemed to be through, even though there
is no official decision of course until monday. a debt buy back program seems to be in the offing. ten billion euros increase for the german guarantees in to the esfs. that's all the statements i heard and that seemed relatively clear. and then i saw some headlines coming out of it afterwards and notice, umm, i wonder whether they got that one right. and maybe that's why the explanation came out later that there were mixed signals from schaeuble. they weren't mixed to me, i'm sorry. >> richard is with us. he's making the point somebody has to pay at some point somewhere down the line. >> you have a debt crisis. the only way you you deal with the debt crisis is to get rid of the debt. so that either happens willingly or unwillingly via default.
at some stage you're in a position where all you've done is put things off and actually built up a moral hazard because you built up the amount of debt. so the problem just becomes would you s worse over time. >> silvia, how will they answer that fundamental question in germany? >> it's not only in germany. it's a combination as per usual, they all need to get reelected and it's not only the german elections that are around the next corner. everybody has to keep facing their own taxpayers. so i think they'll keep doing it with a combination rather than taking all the bitter medicine. either there is a default or the countries that have given the money have to write-off their debt. on one side or the other, it has to go because obviously greece can't pay back, at least not to the extent that they would have to pay back. they might limp through some measures. there was also talk about an interest rate moratorium for up
to ten years. a lowering of interest rates. of course that way you can ease the burden a bit, but ultimately there will have to be a public sector haircut of some sort and a substantial one other than that you can't get any relief from the debt front. >> you're also still in brussels because we have budget talk. let's remind ourselves what david cameron is saying about his opposition to increasing those budgets. >> clearly at a time when we're making difficult decisions at home, it is quite wrong for there to be proposals for this increased interest spending in the eu. so we'll be negotiating very hard for a good deal for britain's taxpayers and to keep the british rebate. >> they want a freeze. will we get an agreement by the end of four days of talks? >> no. and hopefully we won't have four days of talks. so far they only want to talk today and tomorrow and maybe extend into saturday. but let's just remind ourselves where whip last time around.
2005, it was schaeuble against blair, similar scenario, although for different reasons. we didn't get a decision until six weeks later. i think we're gazing down the barrel of that gun pretty much 24 time around, too. thon expects a decision on the budget or consensus on the budget until maybe early next year. and we'll have to find some kind of road into that in van rompuy before we head into the real eu budget summit. and hopefully some of the positions have narrowed. but bottom line is very difficult to push through any budget increase as the eu commission wants. van rompuy already wants a slight reduction. i think we'll get to a compromise, but we haven't touched a real reform of the e
budget. >> silvia, i take all of those points and particularly that last one. i'm never quite sure why the farming community in europe should receive such largess. on on the comparison to twau a, the big difference between twau 5 and now is that in trowel2005 economy was doing well and government debts were very low. now of course the euro is in recession, some parts are in a depression. and every other government is trying to cut its expenditure. i find it absolutely extraordinary that anybody in europe would think it's a good idea to ask for more money now. it seems pleatly misplaced to me. >> yes and no. yes, absolutely. on the one hand, everybody's asked for austerity.
on the other hand, everybody also asks -- we have to kick start growth again and it has to come from somewhere. it clearly doesn't come from just the agriculture ral community. but it's not quite as simple as always saying we have to cut the budget. cutting the budget also means some of the infrastructure, some of the project budgets, some of the slow community movement budgets have to be cut and that could slap growth even further. so not quite as simple as the headline suggests. >> why would you expect the european bureaucrats to do that spending job better than national governments. i don't find that a convincing argument. >> anyway, silvia, we'll let you go because i don't want to run out of line. so we'll come back and we'll follow up on that point. sorry to have to interrupt the
discussion. despite all of this, you're still happy to hold. >> we have been all year actually. we hold no government debt at all in europe, but we hold equities and we're a little bit overweight and we've they ever been underweight this year for the simple reason that they were cheap. so on our very conservative numbers, our implied forward looking equity which is just a fancy way of saying the extra return you're likely to get from equities rather than government debt was about 10% in europe versus less than three in the u.s. and ultimately equity investing is a very easy game. you buy stuff when it's cheap, you tend to make money if you buy it when it's expensive, you tend to lose money. and interestingly enough, european stocks are actually -- eurozone stocks are actually outpurchasing tout purcha performing the u.s. this year. >> we'll talk about high yields,
as well. but we'll take a short break. still to come, am hid inteid in disputes, how many bottles of alcohol are stocked in the cellars of the commission and council? had a number of tweets. sean says definitely 17,934. join the conversation. email@example.com. @cnbcwex. @rosswestgate. we will reveal the answer.
china's manufacturing activity expanded for the first time in more than a year. the data provides a little bit more evidence that perhaps their economy is stabilizing. that might be good news for asia's casino industry. these countries have a small population and in the case of singapore, tough local law which is try to restrict local gaming. so when china slows down, the bottom lines shrink.
joining us to more is aaron fisher. good to see you. thanks for joining us. what happens next particularly on the macao gaming scene? >> we've had some amazing years of growth in made ycamacao. last year's growth rate was 42. but those days are definitely over. average 35% for seven years. the basis got much higher thousand. one of the main reasons why the growth is slowing down is because we are massively capacity constrained in macao
and singapore. so the fact that the pmi looks like it's recovering a little bit recently and looking a bit better for next year, we wouldn't expect major growth. we're looking for about 10% growth to next year and also the year after. >> you've analyzed stocks, some companies that will start raining cash. and if you were going to analyze them warren buffett style would be quite attractive. what are they and what are the key characteristics? >> we had a report out called raining cash and still raining cash over the last couple of years and we published a new report just a couple of weeks ago called macao's checklist. we're basically saying the reason why you should be owning these stocks going forward is because of the dividend yield. these stocks are generated a huge a free cash flow over the last couple years and now they're looking to pay quite high dividends of about 10%.
so we think that's a strong reason to own the is to bes going forward. so it's hard to think about macao as a safe place to be, but as we've highlighted in the report and using buffett as a proxy, it takes a lot of the boxes. so the companies have strong balance sheets. they're basically net cash now. they have high 33% and also generating huge free cash throw. and if you think about the six companies in hong kong, you have three that pay down at that level. so we believe it's very sustainable. >> there you go. buffett like gaming stocks. thanks for that. aaron fisher at clsa.
again for the first time in a year. stocks in shanghai down on concerns it may mean less stimulus from beijing. no sign of compromise in brussels. david cameron reiterating his criticism of plans to increase spending plus palestinians pour on to the streets to celebrate as an egypt brokered cease fire ends eight days of strikes between israel and hamas. maybe people state side waking up early. happy thanksgiving if you have done that. a bit more light probably helps,
as well. u.s. markets are closed of course. slim gains for the ftse. a third for the cac 40. ibex up nearly a percent. fairly solid auction this morning for spain. they need to raise more money than this next year. here is a recap of some of the thoughts already today. >> i would see spain would be a very interesting places to invest in because the market isn't pricing anything in.
they will be -- basis will tighten when it comes to spanish versus the bonds and i think that's a very good space to be. >> trade deterioration in japan and the u kcht au ak and we thi will start weighing on the yen. >> definitely prefer u.s. over europe. we're back to being overweight u.s. versus europe as a fairly high prediction call. >> jeremy says it may be time that the yen sell will be over. is that going to happen? let's show you where we are.
dollar-yen 7 1/2 month highs. wherever you want to go, the yen is weaker. jeremy and richard are still with us. jeremy, how many weaker now? a lot of people clearly are now short of the japanese currency. >> indeed. and as you saw from your board there, you're struggling to find anything that's underperforming or doing worse at least in the current environment. one of the few. the question is how much further as you say. i think it's very difficult to stand in the way of it for now because of course markets are very much buys ased until what the ldb may do after the election. i think it will be tough to break up through the highs of the year. so just north of 84 i think will
be the level where that's the sort of time to maybe take some profit here. if history teaches us anything, we're in a global environment and weaken the currency on and on going basis has to be challenged or needs to be kept in mind. >> i had your name in my head, but it was adrian talking about that. so basically any implications that are being there, this idea that the bank of japan might go for real money printing and target of 3% inflation. >> at face value, if you look at scrap sneeze inflation over the last 20 year, how much times north of 2%. very briefly. we haven't seen any durable inflation above 2% since the early 1990s. so the ability of the japanese to actually print money, to actually get the sort of inflation and the implications
that would have to the necessary weakening of the yen in order to get that i think has to be questioned. albeit there is of course another caveat here that after the election, we do get the prime minister choosing the new boj governor and also the two deputies. so there will be a seismic shift in terms of the policy making board, but even so, even if you change the boj law, the ability to create it has to be weaker. >> you have the question whether you need to revamp the international arrangement of the boj law, second question is whether or not actually even if you ramp up qe, you get more inflation in japan. and you can take one of two views there. so you can either say, well, they've had nine rounds of qe,
they just weren't aggressive enough, or you can say they've been entrenched in deflation since about 1997. and i guess i would probably tend toward the latter view. this much case you would take any further weakness by the hairline of the yen because it's a deflationary currency. it in real terms it's not that strong. >> and i think that's the other point to make. we think dollar-yen being the only real parameter sfauas far the yen evaluation. it's comfortably in the middle part of the trading range over the last 10 to 15 years. and of course we're fixated with dlash yen, but we've seen a massive activity outside the shores of japan. so i think you you need to look
about real less particularly the yen versus the korea yuan, but of course we're still relatively fixated where dollar-yen is trading. >> are politicians being mislead something. >> i don't think they understand the changing dynamics. its he's easier to explain something which may well be workable. >>. >> lgp is one of the great dinosaurs. shifting tanks to monetary policy actually takes attention away from what is really the problem which is that an awful lot of japanese industry needs root and branch reform. stock market needs to be turned
in to a market for corporate control. but it you're a japanese politician, much easier to deflect away from the important questions. >> that's a reflection of politicians generally in the wake of the crisis that we've seen. it is always easier to have a group of people that you can blame for your underlying problems. it's not 9 lack of structure reform. it's not the progressive nature of the economy. it is a group who you you can use as a whipping boy if you'd like. and that's really being used in the banks in terms of the western economy, as the currency in terms of the lgp and monetary policy. >> who would have thought we would have such a good discussion about japan. >> it's interesting that the yen has now been back on the front page of markets at least for a few sessions. which i guess for the european politicians meeting in brussels, it's probably -- >> trying to bone up on who the japanese prime minister is. >> exactly. just before we let you go, i
want to get your view because i mentioned it on high yield. some people saying, look, it's done well. is it toppy, are you lightening up? >> so bond markets, a lot of nonsense about bond markets being in a bubble. and that's generally from strategists who completely fail to get the massive rally in the bond market over the last few years. and again going back to japan, one of the reasons why bonds have been in a massive rally is because we are in a japan-like situation where the private sector is saying forget the differences, it's the similarities you need to focus on. and you'll see bond yields fall to next levels. that's for investment grade credit worthy stuff. when it comes to high yield, we're in a bit more of a quandary. because your spreads are still okay. but yield levels are much lower
than even 2007. your problem here is not so much the default rate unless you think you'll get in a recession, your premium is not high because yields are low. so more of a spread widening risk than a default risk we're worried about. but it's not a bubble because people are buying this stuff for economic reasons rather than simply because they think somebody else will buy it from them down the road which is a definition of a bubble. >> good stuff. richard, always a pleasure. thank you very much. jeremy of course joining us from cibc. thanks, jeremy. turn our attention back to the middle east. international leaders calling for the cease fire to be upheld. the two sides agreed yesterday to abide by a brokered peace deal.
thousands poured on to the streets to celebrate. joining us once again from tel aviv, martin fletcher. celebrations in the gaza strip. what's happening in tel aviv? >> good morning. a sense there's nothing to celebrate. all the congratulations last night, press conferences in gaza this morning, but here in israel, quiet in the streets last night when the cease fire went into effect 9:00 in the evening and today still quiet. there's nothing to celebrate. palestinians got whacked by the 1500 israeli warplane attacks. about 150 palestinians were killed and 20 leaders assassinated. hundreds of attacks against rocket launch cites, and yet
able to claim victory. whereas israelis, they had three killed, about 30 buildings damaged. they feel they did not win. so the definition of victory for israel is a long term if not permanent end to rocket fire from gaza. and there's no sense that they have that. a cease-fire, yes, but no real confidence in that cease fire. and last night the defense minister said he believes the cease fire will be honored, but by past experience, he says he doesn't think it will last very long. so that's the question here. great skepticism. >> martin, thanks very much for that from tel aviv. a bit of a push/pull on oil prices. slipped back lower. 110.63. having you ship my gifts couldn't be easier.
at e-trade, our free online tools and retirement specialists can help you build a personalized plan and execute it with a wide range of low cost investments. get a great plan and low cost investments at e-trade. nymex slightly lower. brent, we went above 111 earlier on today during the asian session after the slightly stronger pmi data out of china. and then the cease fire in gaza,
you can see we've dipped back below. maybe that sum up the drivers for oil. joining us is chief oil energy analyst. chinese demand, middle east tensions? >> i think they are the pull and push factors. china is something the market hasn't been focusing on too much. everybody was still concerned about whether it was a hard landing and whether we just see the bad data to continue. september and october numbers have definitely surprised to the up side and now the pmi above 50 will push that positive sentiment further. >> what about middle east? >> well, a million dollar question over there. from our point of view, we still don't see any physical disruption from the whole gaza situation. but i think the fear in the market very much is this is a regional conflict where other players get dragged into it and
of course israel relationship has been tension. so that's why the the market is worried about it. sx bearing in mind there were fears going to the u.s. elections before after israeli strike, clearly that hasn't happened. so as far as sort of iranian production and disruption is concerned and flaring tensions, what's the key next step? >> i think iran is definitely exporting more today than they were doing about three or four months ago. they've managed to sell a bit more to china and turkey and it has helped them in terms of their economy. of course it's still not doing the 2 1/2 they used to do. probably around 1.2. there is an ieae report that got leaked a bit last week in the press, comes out at some point this week. probably tomorrow. i think that is going to be key. because the leaked stories say they have been enriching more and that will definitely not be
particularly calming for the market which has always been focusing on the iranian nuclear program. >> i know it's hard to work out what the political premium is in oil. what do you think fundamentals supply and demand supgt the price should be? >> it's difficult like you said because of the geopolitical tensions. in terms of pure supply demand fundamentals, i think this is fine. as long as the volatility aro d around -- >> 10 billion barrels a day. >> waivers are coming through for renewal. if the u.s. doesn't give that, do you actually need the saudis to produce more.
and, yes, you can get upward pressure on prices there, but at the moment, i think 110 seems like a sweet spot. >> all right. good to talk to you as always. thanks for joining us. still to come, black friday is nearly upon us. we'll look at how much price matters as opposed to things like, i don't know, customer service. [ male announcer ] this december, remember -- you can stay in and share something... ♪ ♪ ...or you can get out there with your friends and actually share something. ♪ the lexus december to remember sales event is on, offering some of our best values of the year.
hard to believe, but black friday is nearly upon us again. a new study conducted by a technology company that looks at consumer behavior has found customers value service above price. yes, i know, seems extraordinary. joining us is head of voice of customer analytics team. steve, thanks for joining us.
it's a surprising discovery. where have you done the survey and how have you found out this is the case? >> we have done it across several countries across 7,000 respondees and we're finding that it's quite shock to go some people i think that price would automatically be seen as being the most competeitivcompetitive. service is more of the marketing proposition that companies should be going with rather than just putting everything around price. because service is a very eknow difference subject. >> is this equally across online and in the shop? >> it's across all channels. and this is where we're finding a lot of companies are -- >> so it isn't a point about going online. actually price is the whole point about online. >> i think where companies are missing the service is looking at the voice of the customer experience.
so a lot of people might be focusing online and on price or they might be seeing online as more of a complaints channel. >> just trying to think about what is service complaint when you buy online. is it the website was difficult to use, is it i didn't get the delivery of the order in time? what is the service issues online? >> a lot of our customers are finding it's those points of failure that customers really get frustrated with. so where you see sort of the emotion coming into it is where are you easy to do business with as a company. i think this is where service is becoming more to the front rather than the price. how easy are you to do business with. >> and you mentioned social media now playing a part because younger consumers are sharing their experiences good and bad. >> absolutely. they see social media just as a complaint channel, but focus
groups -- >> how are they supposed to interact then is this we know our customers are out there talking about us. how do they engage with it and try to influence it is this. >> a lot of technologies all around taking customer transactions in that thousands and understanding what is that action on the back of it. p so you have focus groups on demand out there. customers are willingly telling you where they're seeing pain in the process, what's delighting them. one thing we found from this survey is that 26% of customers are quite him ambivalent towards their service provider. that's easy pickings for a lot of competitors. so if you can delight them and surprise them, then you'll get those customers on board. >> take the data, analyze and listen to what it's telling you. and keep honing in. i suppose marketing is kind of interesting here, as well. how do feel like to be marketed to? >> what we found is a lot of people again they're not listening to a lot of the
marketing measures out there. there's a lot of fatigue out there. they have too many different channel, being bombarded with different marketing messages. again, analyzing thats voice of the customer will tell you what it is that they like about your products and services and what they're finding to be problematic. and it's really getting that sort of actionable insight and taking that away and doing something with it so that customers you can surprise and delight them. >> okay. steve, thanks very much for joining us. we'll take a short break. still to come, there appears to be no end in sight for europe's growing pains. we'll break down the latest pmi figures. i'm glad we got cdw and cisco to design our data center.